Property taxes are rising for most, early estimates show

Will the budget agreement the Legislature and Gov. Mark Dayton reached last summer leave Minnesota’s property taxes higher next year?

In a word, yes, an MPR News spot check shows.

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A caution: This is Minnesota, and when you talk property taxes, things get complicated. Taxes are not going up everywhere and not for everyone, and it looks like most increases will be in the single digits. But when you open your truth-in-taxation statement this month, chances are it will show an increase, our analysis shows.

We asked local tax officials in more than two dozen places to tell us what was happening to the tax on a median value home. More than three-quarters said preliminary estimates show taxes rising in 2012, even after taking into account a decline in values in most places.

These numbers have been a point of contention since July, when the state temporarily solved its budget problem.

DFLers tend to say property tax increases next year will be the state’s fault: By cutting aid to local governments, the state effectively forced those already-thin governments to make up for it by raising property taxes. Republicans tend to say, no, it isn’t: Property tax decisions are in the hands of local leaders who can cut spending much as the state did to keep taxes down.

Because city, school and county officials don’t sign off on their budgets and tax levies until December, it’s too soon to be certain of the numbers. But local officials have set preliminary targets, and here at Ground Level, we were eager to know early results. So we asked county auditors around Minnesota to tell us what the numbers show for selected homes in their counties. These are the numbers reflected in your truth-in-taxation notice.

We picked several dozen places — urban, suburban, regional hub, small town, rural — and looked at what the taxes were this year on homes of several different values. Then we asked the auditors to take into account three things:

–Changing home values.

–Preliminary 2012 levies set by city, school and county officials.

–The state’s new way of determining how to give the owners of homes worth less than $413,800 a tax break.

The result?

In 21 of the 27 places we’ve heard back on, the median value home appears headed for at least a small tax increase.

In Plymouth in the western suburbs, for example, the median home value has dropped from $304,000 to $299,500 this year, yet the estimated tax on that house is expected to rise 4.2 percent to $3,888.

In Red Wing down the Mississippi River, the value of the median home has dropped from $149,700 to $144,311, but the estimated tax is rising just under 1 percent to $1,829.

In Minneapolis and St. Paul, median home values are falling but the estimated tax on these houses is rising 1.2 and 3.6 percent respectively.

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We have a much better display of the numbers if you click on the map above. Remember, your tax will depend on what happened to your home’s valuation, what your elected officials decide to spend at the end of December and a bunch of other things, so use the data we’ve put into this map as a guide, not gospel. (It may take a moment to load fully; then roll your cursor over the map for details.)

What is pushing taxes up (or, in some cases, down)?

Two big factors: The state changed the property tax law, shifting the tax burden to higher value homes and commercial property. That plays out differently in different places. Secondly, local officials in our sample are — mostly — proposing to raise the total they collect from property owners. That means property taxpayers will make up some or all of the money local governments used to get from the state.

Where taxes are falling

It’s instructive to look at a couple places where taxes appear to be heading down.

In Grand Rapids, taxes look to be dropping for homes of virtually all values because the Itasca County tax base got a huge boost. A power plant expansion and an oil-carrying pipeline came on line, so the burden is spread over more property than last year.

In Brooklyn Park, on the other hand, taxes are going down because home values have fallen more quickly there than in the rest of Hennepin County and the Osseo School District. In essence, Brooklyn Park homeowners own a smaller share of all the property in the county, so their burden is less, said Ken Rowe in Hennepin County’s property tax office.

In St. Cloud, where the tax on a median value home is dropping a few dollars, hold-the-line elected officials get some credit. Stearns County, the city and the school district all are shrinking the total property tax levy they’re seeking. When the state eliminated the market value homestead credit, it created a situation where local officials have to lower their levy, not simply keep it flat, if they hope to prevent taxes from rising.

That’s something most cities, counties and schools in our sample decided they couldn’t do, at least so far. Most raised their preliminary levies, although, as I mentioned, they can still lower them before the end of December.

High value homes hit harder

Median values tell only part of the story, especially this year. Elimination of the homestead credit and creation of the homestead exclusion is shifting the tax burden toward higher value homes and toward businesses. See our Legos-laden video to find out why.

In Albert Lea, for example, the tax on a median value home is dropping a little but the tax on what was a $200,000 home a year ago is estimated to be rising more than 7 percent, even though that home is worth less this year.

If you owned a Red Wing home worth $100,000 last year, your tax is headed down by 5 percent. But if your Red Wing home was worth $400,000, the estimated tax is going up almost 7 percent. Again, that’s true even assuming your home is worth only $385,600 now.

Low-value homes will see taxes drop in most of the places we checked.

The next two tables show how taxes are changing for homes that last year were worth $100,000 and $400,000, respectively.

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The small town experience

For yet another look into the property tax kaleidoscope, consider the situation in the vacation and retirement mecca of Cass County in northern Minnesota.

Say you own a home worth $200,000 in Walker, the county seat. You’re looking at an increase of almost 9 percent to $2,324 largely because of levy increases planned by the city and the school district.

Now say you own a home with the same value in surrounding Shingobee Township, where lake homes abound. Your tax is estimated to be rising 18 percent, but it will still be only $941. For some more rural parts of the county, tax bills might be jumping tenfold, but that could mean going from $5 to $50, said Cass County financial director Larry Wolfe.

Homes in those low-tax-rate areas were getting a huge break from the homestead credit, and most of that help is getting wiped out under the new law.

One factor not represented in these estimates is school levies. In many districts, voters decided Nov. 8 whether to approve additional levies. In some cases, these taxes wouldn’t take effect for another year. In others, they would raise 2012 taxes above what the preliminary estimates cited here show.

And remember: Other than the school levy question, local officials can lower these estimated taxes between now and the end of the year. They cannot raise them.

So are property taxes rising? For most, yes. Did the Legislature and the governor cause that? We’ll no doubt be arguing over that at least through next year’s session.

We tracked down these numbers as part of our Forced to Choose series on how communities are coping with more austere times. Check out all the stories here.

Here’s my conversation with Morning Edition host Cathy Wurzer about this.

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  • Jess Taylor

    Homeowners need to start organizing and inform themselves about this very corrupt property tax system. Attorney Patricia Quintilian has a new book that exposes just how corrupt the system is and how to appeal your own inflated assessment. (Are You Getting Screwed On Your Property Taxes? How To Find Out and How To Fix It!) Property taxes should be going DOWN not up but for some strange reason property owners are asleep at the wheel and at risk for losing their homes. Wake up!

  • Lynda Woulfe

    Thank you for preparing such an indepth article on this issue. It is appreciated and a solid education piece.

  • John Jewel

    I checked the Cass county statistics recently to see what the per capita income was for that area as I am considering retirement. I was floored when I read that over 40% of those Men and Women above age 60 are living below poverty levels. What’s a mere 370% property tax increase to these people.

    Check their zip code it’s EIEIO. There isn’t one single person I know that wouldn’t do their best to make there home town, their neighborhood and the state of Minnesota a better place to live. For those that contribute thanks, for those that take without giving, enjoy and for those that can’t lead -get a job.